This article comes straight from the great mind of Brian Tracy, mainly through his book on negotiation. Also, it includes little things I have picked up from many career experts like best-selling author Ramit Sethi. This information can be applied to all sorts of negotiation: sales, real estate, business deals, negotiating your salary for a career, and much more.
Brian has used this successfully for many years in negotiating many successful million dollar real-estate deals.
Understand That Everything Is Negotiable
The first main point emphasized by Brian Tracy is that everything is negotiable, even if it seems like what is possible is very rigid and inflexible. He wants you to know that you can negotiate on things that may seem impossible to negotiate on if you do it right.
It’s Not Personal
Brian brings up a mindset shift that made him go from someone who sucked at sales to someone who had no fear. He is one of the best salesmen of our time, so there’s definitely something to learn from.
He said that someone told him that in sales, rejection is not personal. They are not rejecting you. They are rejecting the product you have. It’s a knee-jerk reaction to the product or service you present on their mind.
After realizing that, Brian went on to get rejected dozens, if not hundreds, of times a day and become a great salesman. He wants to emphasize that you should apply a similar principle to negotiation.
Note: as you will see in later parts of this article, it should not be completely impersonal. Most likely, you will be seeing or meeting this person for months or years in the future. To keep up your own business or career reputation, it is more socially intelligent to maintain a harmonious relationship on some level.
Types of Negotiation
There’s mainly two types of negotiation:
“Win At The Cost Of The Other” Negotiation:
This is a type of negotiation where one or both parties do not care what it costs to get the deal in his favor. If it means completely making the other person unhappy with the deal or using any manipulative tactics, then so be it. The nature and situation of the negotiation are usually one where you assume you will never see that person again and it doesn’t matter if they come out of it angry, mad, or screwed over.
Brian subtly advises against this type of negotiation. However, if you do use it, he suggests using any psychological tactics or techniques possible to get the job done.
I highly advise against this form unless in very specific situations, such as the lowest rungs of the ladder. It doesn’t align well with my values and morality. Also, it is one where you probably will never amass a ton of money because it’s a small world out there in business and you or your company’s reputation matters. Screwing customers or business partners over will come back to haunt you by word of mouth or some other form of a lost reputation.
As Warren Buffett says, “A reputation can take 20 years to build and 5 seconds to ruin.”
Examples of when this is used are the following:
I visited the streets of China as a child. Contrary to popular assumption, there are still a lot of impoverished parts of China. We visited one massive tourist destination next to a mountain. There were thousands of people moving about and a 50-year-old woman hounded us for about 2 miles as we walked from our parking spot to the mountain.
She used every technique under the sun. She begged and pleaded for my dad to buy something he didn’t want or need: random trinkets and jewelry. You can tell she had been doing this for years and even had time to stop for a second and cheerfully wave at a fellow street peddler of similar age doing the same thing as they crossed paths in opposite directions.
She was clearly going to physically block us from getting into our car and leaving if she had to. She had internalized the behavior of a salesman who has no personal fear of rejection. This was her livelihood as a street peddler in China.
At the end of the day, out of pity and severe annoyance, my dad paid for the trinkets to get her to go away.
Another example would be when I was in high school. There was a shady, overweight Indian student who I would chat with. One day, I was about to sell him a used memory card and started negotiating on the price. This was child’s play as I had no negotiation knowledge or cared about it.
But my suspicion’s were proven true. He was quite manipulative. This guy went ballistic at the opportune time. He screamed and shouted like I had wronged him in front of the whole cafeteria when we got to the cashier. It was clearly a manipulative tactic so that I would calm him down and accept his low-ball price offer.
He ended up doing so and then told me just a couple days later that he had flipped and sold that memory card to another person for over twice the price he paid me (a dick move and not very socially intelligent in building long-term relationships).
Both of these instances are examples of situations where they did not care about whether or not they would see me again. In fact, in the first example, there was almost no chance since it was such a large, free-flowing tourist destination.
Having said that, it’s not always the best move to do this. In the second example, it’s one of those cases where it’s an amateur move that not only compromises morality and values but also is a very unintelligent business and social move. He lost any potential friendship with me and any great business knows that the real money is to be made in getting your customers to return again and again by maintaining a great relationship.
That gets us to the second form of business:
Long-Term Value Negotiation:
In this form of negotiation, you are assuming that you will be dealing with the other party again, sometimes for the next few months or years.
Any big business or even smaller, local business has a reputation that they hold in their local area or on the internet. Especially nowadays with social media amplifying negative or good news and events, it is important to hold a great reputation and brand so that people will trust you and return to you.
Great businesses know that the real money is often to be made in customers returning time and time again because of the relationship that they can trust. A similar thing can be said of business partnerships and deals in terms of negotiation.
In this case, the long-term viewpoint is more important. You want to avoid the failure of this by overemphasizing a short-term gain that turns into a win-lose situation. Brian describes a situation in the book where a businessman did just this and screwed over a hefty long-term relationship by pushing too hard on a short-term gain at the cost of the other party in a negotiation.
Outcomes of Negotiation
Win-Lose or Lose-Win Situations:
This occurs when one party wins out at the cost of another. Usually, the party who loses is screwed over in some way. They don’t get what they want, they may be left angry, or they are completely robbed in the negotiation.
This occurs when both parties have to compromise so much that they both hate the situation. A simple example would be when a husband and wife what to go to different restaurants (Chinese vs. Italian) but end up somewhere through compromising that they both hate (like Indian).
The best type of negotiation. Both parties leave feeling great about the deal. This can be done, although it may require some creativity (perhaps you can find a Chinese AND Italian restaurant for example, which actually exist).
To achieve this kind of outcome, try figuring out what the other party’s ideal situation will be. It may be good to sometimes just ask so you understand where they are coming from. See how you can get their outcome with your ideal outcome as well. Sometimes, you will find that both ideal outcomes are not too far from each other and you will only have to compromise on the small things. This can really speed up the expected time it takes.
Sometimes, you will find that both ideal outcomes are not too far from each other and you will only have to compromise on the small things. This can really speed up the expected time it takes.
Stay Indifferent and Avoid Emotions
The best negotiators have a poker face. Emotions or showing that you are too attached to an outcome can lead to that being used against you.
The major emotions you should avoid are fear, greed, and anger. You might find yourself playing into these during a negotiation if you fear an outcome you don’t want, get too greedy towards an outcome that is way in your favor, or gets baited by the other party into anger.
These emotions could be exploited during a negotiation so if you find yourself diving deeper into these, take a moment to take a break before you continue with the discussion. Trying to continue the negotiation while these are in play may lead to bad decisions that aren’t what you want.
Be Willing To Walk, Have Other Options
It’s important to have other options on the table and truly be willing to walk away. A lot of the power translates to the other party if they realize that you are desperate or really want a specific deal to work out because it’s all you have.
Deals are like girls or trees. There will always be another one. Don’t get too attached and lose out.
If you show that you have other business deals or offers on the table and show your indifference, it will help you negotiate.
It’s always good to have options and alternatives so that you have more freedom to walk. The person who has more options, knowledge, research, and understanding of the other party’s wants and needs wins. You must be willing to show that you will walk out the door if you don’t like the terms of your deal.
Sometimes, it’s necessary to exercise this physically. Brian was able to negotiate a car deal price down to exactly where he wanted it by walking out to leave all the way to the parking lot 4 different times.
Perception is Everything
What they perceive, they believe. If you walk in showing confidence and initiative, they will assume that is how you are even if you are scared to death on the inside.
Brian mentions a cool story about a man who made millions but lost it all in the Great Recession. He never told anyone and people still perceived him to be wealthy. He used that perception to build up his wealth after the loss.
Make sure you are perceived to be someone who is wanted, rare, high-quality, invaluable, or with options, especially for job interviews. Of course, do not lie or make things up. This will bite you in the butt in the long run.
Preparation Is Everything
Preparation is also really important. The more time you invest into the deal or the more prepared you are, the better you will do.
By having a higher level of knowledge, authority, understanding, and/or research, you will get a better deal because people acknowledge that you have really done the work.
If you can prepare precise reasons that are logically sound, your arguments will be more convincing. Many people don’t come prepared with specific things that they want. They make it up as they negotiate. This is a fool’s strategy. When you come into the room, you want to be clear on what your goal or ideal situation is.
A study by Mason, Lee, and Wiley of the Journal of Experimental Social Psychology has shown that sharing precise numbers like $24,585 usually gets a better counter-offer than a rounded number like $24,000 because it gives the perception that you are more knowledgeable in the field.
Put Off The Deal To Get More Time To Prepare
One of the key tactics for great negotiators is delaying the deadline for when a deal is made to get more time to prepare, research, and do their due diligence.
If you are ever pressured to make a deal on the spot when you are not ready or prepared, the only answer is to say No and delay the deadline for when the deal is made.
This is a minor point, but if you’re a serious negotiator, every variable matters. And therefore, this plays a big role in that case.
How comfortable you are in your environment matters. It will give you the advantage or disadvantage in a negotiation. The most common way this plays out is who’s home field you are negotiating in. It’s better to do it in your office where you are more comfortable versus the other person’s office or hometown.
Sometimes, you might need to compromise and decide to meet at a neutral location neither party is familiar with.
Body Language Matters!
Body language is really important!
Don’t Sit Across From Eachother
If possible, do anything you can to avoid sitting across from each other at a table. It puts you in an antagonistic position that implies you are enemies. Instead, look for sitting next to each other or at a round table if possible.
Avoid Closed Body Language
This is stuff like crossing your hands, closing your palms into a fist, or closing off your body to the other person. Again, it implies an antagonistic feel which is not what you want. You want the other person to feel comfortable and agreeable to you.
Try to have open body language with your palms open and faced upward.
Set A Deadline If They Keep Delaying
Conversely, if you are the one who wants the deal done soon and the other party keeps delaying it by putting it off, your best bet is to set an official deadline.
Warren Buffett does this really well. His personality and style are one of a casual, informal, but serious and precise tone: this is the deadline. If you don’t have it in by then, we’re going with someone else. This prevents people from putting it off indefinitely for years.
The ultimatum of “we’re going with someone else” makes it so that there’s a consequence for not delivering. Otherwise, they will just keep putting it off even if you give them a deadline if there’s no pressurized or important consequence. Try that out for yourself.
This can also be used in a lot of other situations not related to negotiation. If someone keeps delaying or putting of an interview or meeting you have scheduled, you can use this ultimatum technique to filter through the BS and see if he or she really wants to meet.
Make The Other Person Comfortable
As humans, we like to be made comfortable, happy, and pleasured. When we are in this mood, we are more likely to agree to things we wouldn’t have.
Brian Tracy gives the great story of how a man went on an important business trip for a week to Japan. The Japanese took care of his whole trip including accommodations and therefore knew the deadline for when he would leave.
For the first 5 days, none of talked about the deal at all. They simply wined and dined him with the best environment possible. When the deal was finally made, he made one that he would have never made in any other situation because of how comfortable they made him feel.
Agree, and Get Them To Agree
It’s important to realize that it’s easier to get someone to agree to something big after they have agreed to a lot of small, but related things leading up to it. If they agree with all the things before it but disagree on the big thing, you can point to all the small things that logically lead up to your big point.
The overall theme to this is to get them open up and like being around you.
One way of opening up yourself is by agreeing to points that the other person makes as well frequently early on. Only do this by making it seem like you are taking your time to agree to something so it seems like the point actually matters and you have to be convinced. If you agree too quickly, the other party can assume that these points simply don’t matter to you.
Law of Reciprocity
Speaking of getting them to like you, it’s worth mentioning the law of reciprocity. We have a psychological bias as humans to help those who help us back.
In addition to it being a part of many universal laws of kindness like the Golden Rule, there’s also psychological hard-wiring at play. This is how people of Hare Krishna get so many donations. They walk up to strangers with a gift first (usually a flower they don’t want).
The strangers feel obligated to donate back and that’s how they get more donations than other charity organizations.
This goes beyond manipulating someone, it is just a great thing to do to help others and by doing so, you will open that person up to be more likely to help and agree with you.
At the start of the negotiation, you want to make it a point to be a Go-Giver rather than a Go-Getter as much as possible.
The Anatomy of a Negotiation
A negotiation usually has its most important parts at the very end of the discussion. It follows the Pareto 80/20 Principle.
Usually, the last 20% of the negotiation is where the most important points are discussed and ironed out. Do not rush the first 80% though. Simply be patient and understand that the first 80% may be on niceties and minor points.
The Walk Out Technique
One way of doing things is to ask from the start what is the best possible price they can do or ask for the walk out price. The point is to show them that you will walk out immediately if it’s not close to the ballpark you are expecting and speed up the process by getting them to offer something better from the start.
This works because the other party is coming in expecting to start the negotiation very slow with a low-ball offer but you come in with a specific question threatening to walk out.
The Add-On Technique
This comes towards the end of the negotiation and is used to add one last thing on to the deal before you close. Again, remember not to push it too far because usually the long-term relationship with the other party matters too.
Here is what you say:
“I will do the deal just as you said with the price and terms if you just add on _______. If you won’t add that on, I’m not doing the deal.” The thing you add on is fairly minor but still sizeable. An example would be if you are negotiating a $3 million house and want to add-on the $100,000 worth of paintings and furniture in the house.
This works because you are presenting the deal as if it’s almost to be closed and agreed upon if not for this small little thing. It makes them want to close the deal. However, you are also providing an ultimatum of it all falling through if that one thing isn’t added on.
Come In With The Possible Outcomes Already In Mind
You should already have a good understanding of 3 possible outcomes and what they would be like: your worst case situation, a medium outcome, and the best outcome. This will help you better prepare.
How High or Low Should Your First Offer Be?
The first offer you throw out should be a slight amount higher than your best offer. You should be expecting that they will counter-offer and it will eventually end up with a compromise somewhere in the middle. Therefore, you shouldn’t be offering too low or it will anchor in their mind a starting point that’s too low.
Practice, Practice, Practice!
Great negotiators are made. It is an acquired skill rather than one you are born with. Practice at every opportunity you can: when buying clothes, cars, or anywhere else. It can save you 20% of how much you spend over the course of your life.
Warren Buffet’s Negotiation Advice
This comes from his annual shareholder meeting in 2016, captured in live video:
“I’ve seen deals fall apart because egos get involved and lines draw in the sand. Negotiations that drag out are more likely to blow out for some reason. I like to get things moving and show a certain amount of trust in a person. Usually, trust comes back to you.
But usually, there’s a bad apple out there. And finding that out isn’t going to come from documents. You really have to size up if a person who is getting a lot of cash from you is going to behave the same way in the future [as they did in the past] because we’re counting on them.
We don’t like things getting gummed up. We’re perfectly fine in losing on a few small points here and there [in negotiations]. Tom Murphy [of Capital Cities] taught me this: you don’t try and win every point. It’s a terrible mistake. You make a decent deal. If you find that it’s in bad faith and gives an indication of the character of a person, that’s another issue (he doesn’t deal with dishonest people) and you’re lucky if you find that out early.”
Manipulation and Tactics Don’t Work! Seek Win-Win.
Although there are tons of books and people teaching manipulative techniques out there, Brian Tracy asserts that in the real world, these things doesn’t work. Screwing someone over on the short-term can cost you much more in the long-term. You live a long life and it’s a small world.
He says that what separates great negotiators from the good ones is that the great negotiators always seek win-win situations and look for a symbiotic relationship rather than a combative relationship. They are usually thinking about the next negotiation and future relationship before the current negotiation is finished with.
A great negotiator uses creativity to find a solution that wins for both parties rather than tries to win at all costs.